Letter to EBRD

February 19, 2013 Posted by otwatchweb

February 15, 2013

Ongoing concerns and key recommendations regarding the Oyu Tolgoi copper and gold mine in Mongolia

Dear Sir Suma Chakrabarti,
We write to express ongoing concerns about the Oyu Tolgoi copper and gold mine in the South Gobi aimag of
Mongolia, which is currently under consideration by the European Bank for Reconstruction and Development
(EBRD) Board of Directors to receive financing. The project, one of the largest and most complex infrastructure
investments proposed by the EBRD, poses a significant environmental and social risk to the local community of
Khanbogd soum in the South Gobi, as well as to the country at large.
Several of the undersigned civil society organizations have been following the development of the project for
many years. Based on those organizations’ site visits and communications with the local nomadic herders whose
way of life is being jeopardized, we know that the project has already caused a significant amount of damage to
the local community and the environment. Moreover, recent research indicating high levels of arsenic in wells
to the east of Oyu Tolgoi1 merits independent scrutiny, given the water needs caused by the project-related
population influx and the Undai River diversion2 and the critical public health issue raised by high arsenic levels.
The EBRD has a crucial role in promoting the transition to a low-carbon society and reducing CO2 emissions for
all sectors of the economy. In spite of this, while Rio Tinto asserts that it is conducting an alternative analysis of
future power sources for the mine, which is currently supplied by electricity from China, reports from the
ground, indicate that construction of worker’s housing has already begun for the planned coal-fired power plant.
This suggests that any alternative analysis by Rio Tinto is only an afterthought. While currently the EBRD covers
carbon-related issues of thermal coal use within the Energy Operations Policy3, such an approach is insufficient
because it reflects outdated knowledge of climate science and relies on unclear policy tools and objectives4.
Rather we believe the World Bank’s guidance on criteria for screening coal projects under the World Bank
strategic framework for development and climate change is a more appropriate tool for the jointly-funded
The Treaty of the Functioning of European Union (TFEU)56 envisages the coherence of the EBRD work with EU’s
law and policies. Moreover, the Bank is a signatory to the EU principle for environment and must apply it in its activities, as well as EU environmental law including AQ Directives which impose limit values for NOX to protect vegetation, and target values for As, Cd and Ni emissions.
We therefore urge you to work with the Board to resolve significant ongoing concerns and to seriously consider
the following recommendations regarding the project.

First, the Board needs to consider whether EBRD financing is strictly necessary for the project to move ahead.
Given that the mine has begun producing concentrate,7 it is questionable whether financing from the EBRD
offers financial additionality at this stage. Furthermore, the late stage at which the Environmental and Social
Impact Assessment (ESIA) has been released and the increasingly limited scope for making serious changes to
significantly reduce the environmental impacts of the project also raises questions about whether the EBRD can
offer environmental additionality in the project.
Moreover, as currently described in the ESIA and as it is being implemented on the ground, the project violates
the EBRD Performance Requirements. The ESIA is incomplete, retroactive, and defective as it relates to these
and other aspects of the project. In particular, it is missing waste rock and tailings management plans, closure
plans and reclamation plans, all of which constitute integral components of the ESIA, which cannot be
considered complete without them. At the very least, the Board date should be postponed until these plans are
disclosed and time is allowed for public comment.
Additionally, we ask that if the EBRD Board of Directors moves forward with considering this project, it commit
to the following recommendations as requirements to the loan agreement between the EBRD and Oyu Tolgoi
LLC. The recommendations relate to six major areas of concern: (1) water scarcity; (2) the Undai River diversion;
(3) deficiencies in the compensation and consultation framework for impacted herders in Khanbogd; (4)
technical aspects of the mining operations; (5) the proposed coal-fired power plant; and (6) biodiversity. Finally,
in accordance with the Performance Requirements and Public Information Policy of the EBRD, a clear, robust
monitoring and reporting system should be instituted to ensure that the company complies with its
environmental and social obligations.
1. Water Scarcity

  • The company should disclose on its website all documentation cited in the ESIA related to water resources.
  • The company should be required to substantiate its claims that water abstraction from the Gunii Hooloi deep aquifer will not cause a draw-down effect due to leaking boreholes, instability and the rate of pumping, which would deplete the shallow aquifers upon which the herders and wildlife depend.
  • The company should provide convincing evidence that it has enough water to sustain production throughout the 30-60 year lifespan of the mine without adversely impacting regional water security. Given that there is only enough groundwater to sustain projected development in the Southern Gobi Region until 2020,9 diversion of the Orkhon River and other surface water sources will be needed to support the project-related population influx and associated facilities. The company should study and develop appropriate mitigation plans to address the social and environmental costs, including transboundary and cumulative impacts, related to the reasonably foreseeable need to divert additional surface waters.
  • The company and its contractors should cease the use of water from the Khanbogd community well and should not enter into private water use negotiations with the local herders.
  • The company should not expand operations beyond the 100,000 tpd proposed in the ESIA based on the lack of proven water resources.


2. Undai River Diversion

  •  The company should stop all work on the Undai River diversion, which has moved forward without appropriate consultation with herders. Diversion of the Undai River will cause significant, permanent, and unmitigated negative impacts on important ecological services provided by that portion of the river, including through the loss of the Bor Ovoo spring, which is the last to freeze in the winter. The planned artificial spring has not been demonstrated to support fully the needs of the herders and wildlife because it will freeze early and will not perform the same ecological functions as the original natural spring. The company should respect the rights of the local herders to protect a vital source of water.


3. Compensation and Consultation Framework

  • The company should develop an agreed-upon and tested methodology for evaluating all of the impacts on herders, including decreased quality and quantity of pastures and water resources, and health impacts on herders and their animals. This methodology should then be applied transparently and consistently to all impacted households, including those whose summer and reserve pastures have been eliminated or degraded by the project and its associated facilities. To date, the company’s compensation framework, including the 2004 resettlement contracts and the 2011 economic displacement contracts, does not take into account the realities of the herders’ livelihoods, in particular by failing to adequately compensate for the loss in quality and quantity of the herders’ water resources and pastures, including the summer and reserve pastures, which are the most important to the herders.
  • Herders should be presented with concrete, accurate information on a regular basis (at least monthly) about all project impacts – particularly those that present significant risks to the herders, such as the diversion of the Undai River and health risks from project-related water, air, and soil contamination – in a way that is culturally appropriate. The herders’ opinions should also be integrated into all mitigation plans.
  • The company should retain qualified, independent social scientists to properly evaluate the definition of “Indigenous Peoples” as it applies to the nomadic herders in Mongolia, per the standards set forth in EBRD Performance Requirements 5 & 7, particularly PR 7.4’s recognition of the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP). The EBRD should separately re-evaluate its previous statements regarding the applicability of Performance Requirement 7, taking into account the results of the social scientists’ evaluation. The herders, who consider themselves indigenous people and whose self-identification as such is supported by NGOs that work with indigenous peoples, will lose the ability to practice their traditional herding lifestyles if they are not able to work with OT to help design the project in a way that will reduce the impacts to their way of life, as required by Performance Requirement 7.

4. Mining Operations
a. Block Caving: Block caving is a method of mining in which workers remove the support rock from
beneath the ore bodies, resulting in cave-ins, which fracture and drop blocks of the ore body, as well as
causing subsidence of the land surrounding the cave-in zone. This land will be too physically unstable to
support any post-mining land use, resulting in a huge area of land that will have to be permanently

  •  The company should pursue alternatives to block caving, even if this necessitates foregoing some ore reserves, to prevent the subsidence of the projected 8km2 of land above the first of the two block cave mines, rendering the land permanently damaged and unusable due to physical instability.11

b. Tailings Management: Tailings are the waste material produced following the grinding and processing
of ore in the concentrator and will constitute more than 95% of the volume of the ore, including
associated heavy metals not recovered in the floatation process. The tailings dam or “storage facility” is
designed to act as a waste “sink” for mining slimes containing toxic heavy metals, metalloids, and
phthalates from the concentrator, and waste from the coal-fired power plant.


  • At a minimum, the company should make publicly available the technical memo on which it is relying

to justify its decision to use wet tailings,12 given that its wet tailings storage method accounts for
more than 80% of Oyu Tolgoi’s water losses.13

  • Barring significant justifications unrelated to cost, the company should switch to dry tailings, as this

method is well-suited for cold climates and will significantly cut the mine’s water needs. In addition
to the water-saving benefits, employing dry tailings would obviate the need for a wet tailings
impoundment facility, thereby significantly reducing the irreversible degradation of a large land area.
Dry tailings would also allow a redesign of the mine area so as to avoid destruction of the Bor Ovoo
spring, and the tailing could be used to backfill the open pits and underground workings, with
associated environmental benefits.
c. Waste Rock Management: Waste rock is the largest volume of material proposed for excavation at the
Oyu Tolgoi open pit.

  • Although waste rock stockpiles are already in operation to manage the pre-stripping, commissioning,

and ore production activities that have taken place over the last three years, the ESIA did not
include a waste rock management plan. The company should immediately disclose its waste rock
management plan.
5. Coal-Fired Power Plant

  • The EBRD’s Mining Strategy recognizes the World Bank guidance on Criteria for Screening Coal Projects under the World Bank Strategic Framework for Development and Climate Change (SFDCC Coal Guidance), which must apply to any coal-fired power plant built as part of this project.
  • A full alternatives analysis must be conducted that meets the EBRD’s Performance Requirements 1 & 3, so as to align with Criterion 2 of the SFDCC Coal Guidance. Reports from the ground indicate that the company is already preparing the “power camp,” located near the current heating plant, which will house workers for the power plant construction. This suggests that the company has decided to build a coal-fired power station, and any alternatives analysis it conducts will only be cursory. Under the Coal Guidance, the IFC must appoint an expert panel to ensure the quality the alternatives analysis and its compliance with the Coal Guidance. The EBRD should recognize and support this expert panel.
  • If, after a thorough alternatives analysis that fulfills the requirements of both Performance Requirement 3 and the SFDCC Coal Guidance, the company determines that a captive coal plant is still the least-cost option, the IFC must consider viable, low-cost, low-carbon alternatives and seek additional funding for a low-carbon alternative, as required under Criterion 4 of the SFDCC Coal Guidance.
  • To meet EBRD Performance Requirement 1, a complete ESIA must be conducted that includes the

cumulative environmental and social impacts of the mine and the power plant for the duration of the
project’s life. In particular, the water impacts and needs of both the mine and the power plant must be
analyzed together.
6. Biodiversity

  •  The company should immediately develop a strong, detailed, long-term species conservation and habitat protection plan, including a rigorous monitoring strategy, rather than relying on the adoption of ad hoc strategies as the project progresses. The company’s current mitigation strategies, as described in the ESIA, are insufficiently detailed and suffer from a lack of empirical data. Similarly, the offset strategy is predicated on insufficient and inaccurate data, which calls into question the company’s precise estimates of positive net impacts. Given the remaining serious concerns and the continued failure to disclose key management plans, we recommend that EBRD’s Board postpone consideration of this project. Should the Board choose to move forward with this project despite these problems, we ask that a clear, robust monitoring and reporting (M & R) system should be part of the project loan and guarantee agreement. The M & R system should have a procedure to monitor and measure the effectiveness of all management and mitigation plans, as well as compliance with the related legal and/or contractual obligations and regulatory requirements. Specifically, this system should include the above-mentioned recommendations as indicators of compliance. The M & R system should also include representatives from affected communities as participants in monitoring activities. Finally, considering the significant impacts of the project, we ask that external experts be retained to verify the company’s monitoring reports. Periodic progress reports should be made available on the EBRD and the OT LLC project webpages.

Thank you for your consideration of these recommendations. Please feel free to contact us if you would like to
discuss these matters in further detail.
Battsengel Lhamnorov, Gobi Soil, Khanbogd, Mongolia
Sukhgerel Dugersuren, OT Watch, Mongolia
Sarah Singh, Accountability Counsel, USA
Jaybee Garganera, Alyansa Tigil Mina (ATM), Philippines
Jelson Garcia, Sarah McNeal, Bank Information Center, USA
Pieter Jansen, Both ENDS, Netherlands
Petra Kjell, Bretton Woods Project, UK
Natalia Ablova, Bureau on Human Rights and Rule of Law, Kyrgyz Republic
Sergey Shapkhaev, Buryat regional Union on Lake Baikal, Mongolia
Vladlena Martsynkevych, CEE Bankwatch Network, Czech Republic
Urantsooj Gombosuren, Centre for Human Rights and Development, Mongolia
Zanaa Jurmed, Citizens Alliance Centre, Mongolia
Chuluunbat Alimaa, Creative Initiative Centre, Mongolia
Jennifer Gleason, Mark Chernaik, Environmental Law Alliance Worldwide, USA
Karen Orenstein, Friends of the Earth U.S., USA
Tom Griffiths, Forest Peoples Programme, UK
Hasan Mehedi, Humanitywatch, Bangladesh
David Pred, Inclusive Development International, USA
Andy Whitmore, Indigenous Peoples Links (PIPLinks), UK
Joanna Levitt, International Accountability Project, USA
Zachary Hurwitz, International Rivers, USA
Maurice Ouma Odhiambo, Jamaa Resource Initiatives, Kenya
Yuki Tanabe, Japan Center for Sustainable Environment and Society (JACSES), Japan
Luke Fletcher, Jubilee Australia, Australia
Richard Harkinson, London Mining Network, UK
Catherine Coumans, MiningWatch Canada, Canada
Undarya Tumursukh, MONFEMNET, Mongolia
Doug Norlen, Pacific Environment, USA
Urantulkhuur Gombosuren, People’s Coalition for Food Sovereignty, Mongolia
Nicole Ghio, Sierra Club, USA
Paul Robinson, Southwest Research and Information Center, USA
Regine Richter, Urgewald, Germany
Halyna Protsiv, Ecological club “KRAY”, Ukraine
Yuri Urbansky, National Ecological Centre of Ukraine
Inga Zarafyan, “EcoLur” Informational NGO, Armenia
Kirsty Wright, World Develoment Movement, UK
Ana Colovic Lesoska, Center for environmental research and information Eko-svest Macedonia
Ulrich Delius, Society for Threatened Peoples – Germany

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